Home sales probably plunged in July, and orders for long-lasting goods climbed for the first time in three months as the U.S. strained to sustain the recovery from the worst recession since the 1930s, economists said before reports this week.
Purchases of new and existing houses dropped 12 percent to a 5.01 million annual pace, the lowest since March 2009, according to the median forecast of 54 economists surveyed by Bloomberg News. Durable-goods bookings climbed 3 percent last month, the survey showed.
“The economy is stuck in a rut,” said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit. “We lost the momentum in the second quarter and now we’re really struggling to regain any momentum at all.”
Another report this week may show the economy grew from April through June even less than previously estimated, one reason why employment and consumer spending have failed to pick up. Federal Reserve Chairman Ben S. Bernanke may shed more light on policy makers’ outlook this week when he addresses central bankers from around the globe.
Bernanke will speak on Aug. 27 at the Fed Bank of Kansas City’s annual symposium in Jackson Hole, Wyoming. Earlier this month policy makers said the recovery was “more modest” than they had projected, prompting them to take additional steps to revive growth. The chairman may provide more insight into the central bank’s decision to maintain its asset holdings in a bid to prevent money from draining out of the banking system.
Sales of previously owned homes slumped 13 percent in July to a 4.68 million annual rate, according to the survey median before an Aug. 24 report from the National Association of Realtors. Commerce Department figures the following day will show demand for new houses was little changed at a 330,000 annual rate, the survey showed. New-home sales reached a record- low 267,000 pace in May, the month after a government tax credit expired.
The incentive worth as much as $8,000 propelled demand earlier in the year as buyers rushed to qualify ahead of the April 30 deadline for signing contracts and original June 30 deadline for closing deals. Sales have since plunged, indicating Americans lack the confidence to take on such a large purchase.
“There is definitely a pullback in demand,” Richard Dugas, chief executive officer of Pulte Group Inc., said in an interview Aug. 20. “We really need the economy to improve and job creation to take hold before people feel comfortable stepping into a home.”
Pulte, the largest U.S. homebuilder by revenue, on Aug. 4 reported its first quarterly profit since 2006 after a tax benefit and sales boost from its purchase of Centex Corp.
Orders for goods meant to last at least three years increased in July after falling 1.2 percent and 0.7 percent in the previous two months, economists project another Commerce Department report on Aug. 25 will show.
Business investment in capital equipment, including computers and machinery, is one of the remaining bright spots in the economy.
That may explain why shares of machinery makers are outperforming builder shares and the broader market. The Standard & Poor’s Supercomposite Machinery Index has climbed 10 percent so far this year, compared with a 12 percent drop in the S&P Supercomposite Homebuilder Index. The S&P 500 Index is down 3.9 percent since Dec. 31.
Since the advance estimate for second-quarter growth was released on July 30, reports have shown the trade deficit swelled in June more than the government had projected, inventories grew at a slower pace and there was less of a rebound in commercial construction.
The Commerce Department’s update on Aug. 27 will therefore show gross domestic product grew at 1.4 percent pace, the weakest quarter of the recovery that began in the middle of last year, rather than the 2.4 percent rate calculated last month.
Claims for jobless benefits, due from the Labor Department on Aug. 26, retreated to 491,000 last week from a nine-month high of half a million the prior week, the survey showed. The surge in applications over the past month indicates the labor market may be taking a turn for the worse as the economy slows.
President Barack Obama last week seized on the jump in claims to draw attention to stalled legislation aimed at helping small businesses.
The Democrats have proposed a plan that would ease the terms of loans guaranteed by the Small Business Administration and provide $12 billion in tax breaks to small businesses. Action was blocked by Republicans who criticized the proposal as being similar to the $700 billion bank bailout of 2008.
Jobs and the economy are likely to be key issues in November elections that will determine which political party controls congress for the next two years of Obama’s term.
Bloomberg Survey ============================================================== Release Period Prior Median Indicator Date Value Forecast ============================================================== Exist Homes Mlns 8/24 July 5.37 4.68 Exist Homes MOM% 8/24 July -5.1% -12.9% Durables Orders MOM% 8/25 July -1.2% 3.0% Durables Ex-Trans MOM% 8/25 July -0.9% 0.5% New Home Sales ,000’s 8/25 July 330 330 New Home Sales MOM% 8/25 July 23.6% 0.0% Initial Claims ,000’s 8/26 21-Aug 500 491 GDP Annual QOQ% 8/27 2Q S 2.4% 1.4% U of Mich Conf. Index 8/27 Aug. F 69.6 69.6 ==============================================================